With the implementation of Goods and Service Tax, from 1st July, 2017, as prevailing under the earlier tax regime, the restaurants were bifurcated into the category of AC restaurants and Non-AC restaurants. GST payable on the food being served by the AC restaurants was higher i.e. 18%, however, GST payable on the food being served by the non-AC restaurants was comparatively lower i.e. 12%.However, the entire tax structure of the restaurant service underwent a change from November, 2017. The reason for the change in the tax structure and the current tax structure is being explained in the below paras.
In the 23rd GST council meeting, the entire GST levy on the restaurant service underwent a transformation thereby benefiting the customer at large. The GST rate was slashed down from 18% to 5%, however, with the reduced in GST rate the input tax credit (ITC) benefit was withdrawn from the restaurant owner.
The main reason behind the cutting down of the rates and non-availability of ITC was that the GST council had observed that the benefit of input tax benefit (ITC) available to the restaurant was not being passed on to the customers. The restaurant owners used to charge GST at higher rates without passing on the benefit of ITC and hence the same added to the burden of customers.
1. All standalone restaurants (whether AC restaurant or non-AC restaurant) – 5% without the benefit of ITC.
‘Restaurant’ includes mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied. Further ‘Restaurants’ also includes all the restaurants other than those restaurants which are located in the premises of the hotels, inns, guest house, clubs, campsites or other commercial places meant for a residential or lodging purpose which is having declared tariff.
2. Food parcels / takeaways – 5% without the benefit of ITC.
3. Restaurants in hotel premises having room declared tariff of less than INR 7500 per unit per day – 5% without the benefit of ITC.
4. Restaurants in hotel premises having room declared tariff of INR 7500 and above per unit per day – 18% with the benefit of full ITC.
5. Outdoor catering – 18% with the benefit of full ITC.
Declared tariff includes charges for all the amenities provided in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit.
The above changes were made effective from 15th November, 2017.
The restaurant business is eligible to opt composition scheme under the GST law. However, the restaurant is required to follow the prescribed composition GST rules.
If the restaurant owner opts for composition scheme than he is required to pay GST @5% and file GSTR-4 return on a quarterly basis. The rate at which restaurants are required to pay GST is fixed at a concessional rate of 5% which is to be levied on the turnover subject to the following restrictions:
• The Turnover of the restaurant should not exceed Rs 1.5 Crores (Rupees 150 lakhs). However, this limit Rupees 1 Crore for special category States.
• The restaurant should not be engaged in any services other than restaurant subject to certain exemptions.
• The restaurant can’t be engaged in the interstate supply of goods.
• The restaurant can’t supply any items exempt under GST.
• The restaurant can’t supply goods through an e-commerce operator.
• The restaurant can’t avail any ITC (Input Tax Credit).
• The restaurant can’t collect taxes from the customer.
• mention the words “composition taxable person, not eligible to collect tax” on the bill of supply.
• mention the words ‘composition taxable person’ on every notice or signboard at their place of business or additional place of business.
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